California short line claims legal victory

Sierra Railroad Co., an operator of freight trains and passenger excursions, said it has been awarded "$39.6 million in compensatory and punitive damages in a service contract dispute with Patriot Rail Corp." by a California jury.

Sierra said Tuesday, May 6, 2014 that the California jury found that Patriot "breached its non-disclosure agreement with Sierra, committed fraud, willfully and maliciously engaged in the theft of Sierra's trade secrets, and interfered with Sierra's rail service contract at McClellan Business Park in Sacramento, Calif."

The company asserts that Patriot, "after taking over the rail contract, tried to obtain a court order in 2009 forcing Sierra to sell after prolonged negotiations, as well as requesting reimbursement for monetary damages."

But the jury awarded Sierra $22.2 million in compensatory damages, along with an additional $17.4 million in punitive damages, for a total award of $39.6 million, Sierra said.

"Patriot stole our operation at McClellan and nearly bankrupted our company," said Sierra Railroad Co. President and CEO Michael Hart. "Being falsely accused of fraud for five years in federal court has deeply impacted not just Sierra, but our other businesses as well, such as Sierra Northern Railway, the Sierra Railroad Dinner Train, the Sacramento RiverTrain, the Skunk Train, and Sierra Energy. We've lost millions in revenue and lost opportunities."

In 2012, SteelRiver Infrastructure Partners acquired Patriot Rail Corp. with full knowledge of the pending lawsuit and, a year later, changed Patriot's name to Patriot Rail Company, LLC.

But according to Sierra General Counsel Torgny Nilsson, "Neither Patriot Rail Company, LLC nor its new owners made any effort after the 2012 sale to dismiss Patriot's baseless lawsuit against Sierra, to return the stolen McClellan operation to Sierra, or to otherwise compensate Sierra for Patriot's illegal actions." He added, "Judge Troy L. Nunley correctly found that the sale and name-change did not alter Patriot's liability for the damages awarded by the jury."